COP25: Growing voluntary carbon market seeks stay from Paris-era rules

Published 22:42 on December 9, 2019  /  Last updated at 23:24 on December 9, 2019  /  Climate Talks, International, Kyoto Mechanisms, New Market Mechanisms, New Zealand, REDD, Voluntary Market  /  1 Comment

The voluntary carbon market is seeking a 5-10 year stay from emissions auditing rules to prevent a collapse in clean investment, a risk some governments say is unfounded and could even slow national climate action.

The voluntary carbon market is seeking a 5-10 year stay from emissions auditing rules to prevent a collapse in clean investment, a risk some governments say is unfounded and could even slow national climate action.

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1 Comment

  1. Lloyd Vas says:

    An interesting article. One can see both sides of the argument. However, from a fundamental perspective, it is important that the carbon market follows the rules of traditional physical commodity markets.

    Physical commodity markets are characterised by the production and subsequent trade of a standardised unit of a physical good such as agricultural products, metals, energy, etc. They are positive commodity markets.

    The carbon market, on the other hand, is a market based on the reduction and subsequent trade of one tonne of CO2e. As such, it the trade of a negative commodity.

    But whether the commodity is positive or negative is irrelevant, they are all physical commodities being traded in the international market.

    As an analogy to carbon, take for example the production and trade of one tonne of rice from an exporting country to an importing country. As a physical commodity, the one tonne of rice can only be eaten once by buyer from the importing country. It impossible for the exporting country to also eat this rice and still sell a full tonne to the buyer. If the exporting country were to do so, the buyer from the importing country would be getting short changed and this would negatively impact future trade between the two.

    Looking at the same tonne of rice, if a financier was to invest in the production of the tonne of rice and it was subsequently sold to another buyer, the financier would not be able to stake a claim on any of the physical rice. Sure they can take credit for providing financial assistance to the farmer, but they cannot eat the rice. The rice can only be eaten once, by the end buyer.

    These natural principles from positive commodity markets should also be applied to carbon as a negative commodity market. In order to attract the level of public and private sector finance required to meet the Paris Agreement, the carbon market needs to move from the niche to the mainstream.

    The best way to achieve this is to follow the natural rules of traditional commodity markets. To do otherwise will undermine the integrity of carbon as a standardised commodity and scare away the large scale investment required to mainstream the carbon market.

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